WHAT CONSTITUTES A RETRENCHMENT?

An employee is said to be retrenched when his or her job becomes redundant and the employer either cannot offer the employee an alternative position or, any alternative position offered by the employer cannot be accepted by the employee.

An employee is often referred to as “redundant” but a more accurate description is that the job the employee was employed to perform has become redundant. That is, the job has become redundant, not the employee. “Retrenchment” is the expression to describe what happens to an employee whose employment is terminated by reason of their job becoming redundant.

Retrenchment has been defined by a Court as being a termination of employment that is “not on account of any personal act of the employee dismissed or any consideration peculiar to him, but because the employer no longer wishes the job the employee has been doing to be done by anyone”.

The following circumstances can amount to a redundancy:

• where the employer has introduced new technology resulting in the employee no longer being needed to work in his/her job;
• the employer restructures the organization and the job is no longer needed to be done by the employee;
• the employer by reason of financial necessity, has to reduce the size of it’s workforce;
• the employer dismisses a worker and re-distributes their work to those who remain;
• the employer, being a company, has failed and receivers have been appointed.

Redundancy and unfair dismissal laws interact in such a way that a retrenched worker can make a claim for unfair dismissal. The Courts will take the view that provided the employer has acted in good faith then the employer’s needs must be respected. However, a claim can be made that the dismissal by way of redundancy is harsh, unjust or unreasonable on the grounds that:

• The worker was unfairly selected for redundancy;
• The worker was selected for redundancy because of work performance without having been given the opportunity to respond to the employer’s concerns about his ability or performance;
• The worker was not properly consulted before the decision to retrench was made;
• In some cases non-award employees can attack the adequacy of the redundancy payments made to them.

ARE YOU ENTITLED TO RETRENCHMENT PAYMENTS?

To establish what your entitlements are in a redundancy situation you must ask the following questions:

Are you the subject of an award (Federal or State) or other industrial instrument (certified agreements, certified agreements etc)?

Then the terms of the award or instrument relating to redundancy will apply.

If there are no industrial instruments or awards applicable to your employment, do you have a written agreement/contract of employment with your employer?

If there is a contract/agreement and there is provision for redundancy conditions then the agreement will apply.

If there is no written agreement or award or other industrial instrument, is there a company policy document or manual which can be implied into your contract of employment.

It may be argued that the provisions of the policy or manual apply to the terms of your redundancy.

If there is no written agreement, award or other industrial instrument, or other document such as a written policy or manual, is there a custom or practice within the company which might apply redundancy provisions in your particular case?

If you have difficulty answering these questions or understanding whether you are entitled to redundancy payments you should consult a lawyer or your union representative. 

THE LAW RELATING TO RETRENCHMENT

The sources of law governing redundancy are:

• Award and agreement clauses
• Statutory provisions protecting workers whose employment is terminated for technological, structural or economic reasons.

Where 15 or more employees are proposed to be terminated by an employer the employer must notify the Commonwealth Employment Service of the proposed termination for reasons of an economic, technological, structural or similar nature. (Section 170CL of the Work Place Relations Act 1996 (Commonwealth Legislation) and Part 4 of the Industrial Relations Act 1999 (Queensland).

The Australian Industrial Relations Commission also handed down the Termination, Change and Redundancy case, Supplementary Decision (1984) 9 IR 115 which is known as the TCR case, supplementary decision. This decision is in similar terms to the Queensland declared Policy guidelines which are discussed below. 

THE POSITION IN QUEENSLAND

A decision was handed down in the Industrial Conciliation and Arbitration Commission of Queensland, No. B735 of 1984 which declared Policy guidelines applicable to termination of employment, and redundancy.

This Policy established standards which could be adopted in particular awards or other industrial instruments.

The Policy is not binding in circumstances where there is no applicable award or agreement but is often used as a guide by employers to make redundancy payments to employees.

The relevant provisions are summarised as follows: 

Clause C – Redundancy

Where an employer has made a definite decision that he/she no longer wishes the job the employee has been doing to be done by anyone and that decision may lead to termination of employment then the employer must hold discussions with the employees directly affected, and where relevant with their Union or Unions. Those discussions must take place as soon as possible after the decision is made and must cover the reasons for the proposed terminations, measures to avoid or minimise the terminations and measures to mitigate the adverse effects on the employees concerned.

Where an employee is transferred to lower paid duties the employee is entitled to the same period of notice as if his/her employment had been terminated or the employer may elect to make payment of the difference between the former ordinary time rate of pay and the new lower ordinary times rate of pay in lieu of notice.

Where a business is “transmitted” (which includes sold, transferred, assigned) to another employer then the continuity of the employment of the employee is deemed not to be broken by the “transmission” to the new employer. This has the effect of the continuation of long service leave and other entitlements as if the period of employment was continued.

An employee is entitled to at least one day’s time off without loss of pay during each week of notice for the purposes of seeking other employment.

The employee is entitled to a prescribed period of notice or payment in lieu of notice together with prescribed severance pay as follows: 

Termination Notice

Period of Service               Period of Notice

1 year or less                        1 week

1 year and up to 3 years     2 weeks

3 years and up to 5 years   3 weeks

5 years and over                  4 weeks

Where an employee is over 45 years (and has not less than 2 years continuous service) 1 additional week.

Severance Pay (applicable to redundancy)

Period of Service                             Severance Pay

1 year or less                                      Nil

1 year up to completed 2 years       4 weeks pay

2 years up to completed 3 years     6 weeks pay

3 years up to completed 4 years     7 weeks pay

4 years and over                                8 weeks pay

A weeks pay means the ordinary time rate of the employee. The severance payment cannot exceed the amount the employee would have received if the employment proceeded to the employees normal retirement date.

The above severance provisions do not apply to employees who have their employment terminated for misconduct or employees engaged for a specific period of time or for a specified task, or to casual, seasonal employees or employees engaged by the hour or day. 

INDUSTRIAL RELATIONS ACT 1999 (QLD)

Section 84(1) of the Act mirrors the minimum period of notice requirements set out above.

The Act also provides in Part 4 Section 86 to 90 that where 15 or more employees are to be retrenched the Commonwealth department responsible for helping unemployed people find work and the union/s of the employees must be notified as soon as practicable after making the decision.

The notice given must state the number and categories of employees being dismissed, the reasons for the dismissals and the time or period of time over which the employer intends to carry out the dismissals.

Section 88 (3) of the Act empowers the Qld Industrial Relations Commission to make orders:

• to reinstate the employee/s to their former position or if that is not possible another position. Further orders may be made to compensate the employee for remuneration lost;
• that the employer pay each employee a sum equal to 135 penalty units (each penalty unit representing $75.00)
• declaring the dismissal ineffective until the employer has given the notice.

An application under Part 4 of the Act must be made within 21 days of the dismissal taking effect or within such further time as the Commission may allow. 

FURTHER INFORMATION

This Information Outline is provided courtesy of Hall Payne Lawyers who are experienced in this area of law. They are located at Level 9, 344 Queen Street, Brisbane, QLD 4000 or call them on (07) 3221-2044 if you would like more information on this legal topic, or you wish to obtain formal advice regarding your situation.

Hall Payne Lawyers are an established Queensland firm practicing in the areas of employment law (unfair dismissal etc), accident compensation (WorkCover, motor vehicle accident, personal injuries), anti-discrimination & harassment, consumer law, family law, wills & estates, criminal law and conveyancing. Hall Payne Lawyers are a founding member of the Australia-wide PeopleLaw group.